The Global Financial Crisis of 2008-09 was a period of severe macroeconomic instability for the United States and the global economy more generally. The crisis was precipitated by the collapse of a number of financial institutions who were deeply involved in the U.S. mortgage market and associated credit markets. Beginning in the Summer of 2007, a number of banks began to report issues with increasing mortgage delinquencies and the problem of not being able to accurately price derivatives contracts which were based on bundles of these U.S. residential mortgages. By the end of 2008, U.S. financial institutions had begun to fail due to their exposure to the housing market, leading to one of the deepest recessions in the history of the United States and to extensive government bailouts of the financial sector.

Subprime and the collapse of the U.S. mortgage market

The early 2000s had seen explosive growth in the U.S. mortgage market, as credit became cheaper due to the Federal Reserve's decision to lower interest rates in the aftermath of the 2001 'Dot Com' Crash, as well as because of the increasing globalization of financial flows which directed funds into U.S. financial markets. Lower mortgage rates gave incentive to financial institutions to begin lending to riskier borrowers, using so-called 'subprime' loans. These were loans to borrowers with poor credit scores, who would not have met the requirements for a conventional mortgage loan. In order to hedge against the risk of these riskier loans, financial institutions began to use complex financial instruments known as derivatives, which bundled mortgage loans together and allowed the risk of default to be sold on to willing investors. This practice was supposed to remove the risk from these loans, by effectively allowing credit institutions to buy insurance against delinquencies. Due to the fraudulent practices of credit ratings agencies, however, the price of these contacts did not reflect the real risk of the loans involved. As the reality of the inability of the borrowers to repay began to kick in during 2007, the financial markets which traded these derivatives came under increasing stress and eventually led to a 'sudden stop' in trading and credit intermediation during 2008.

Market Panic and The Great Recession

As borrowers failed to make repayments, this had a knock-on effect among financial institutions who were highly leveraged with financial instruments based on the mortgage market. Lehman Brothers, one of the world's largest investment banks, failed on September 15th 2008, causing widespread panic in financial markets. Due to the fear of an unprecedented collapse in the financial sector which would have untold consequences for the wider economy, the U.S. government and central bank, The Fed, intervened the following day to bailout the United States' largest insurance company, AIG, and to backstop financial markets. The crisis prompted a deep recession, known colloquially as The Great Recession, drawing parallels between this period and The Great Depression. The collapse of credit intermediation in the economy lead to further issues in the real economy, as business were increasingly unable to pay back loans and were forced to lay off staff, driving unemployment to a high of almost 10 percent in 2010. While there has been criticism of the U.S. government's actions to bailout the financial institutions involved, the actions of the government and the Fed are seen by many as having prevented the crisis from spiraling into a depression of the magnitude of The Great Depression.

Following the drastic increase directly after the COVID-19 pandemic, the delinquency rate started to gradually decline, falling below *** percent in the second quarter of 2023. In the second half of 2023, the delinquency rate picked up, but remained stable throughout 2024. In the first quarter of 2025, **** percent of mortgage loans were delinquent. That was significantly lower than the **** percent during the onset of the COVID-19 pandemic in 2020 or the peak of *** percent during the subprime mortgage crisis of 2007-2010. What does the mortgage delinquency rate tell us? The mortgage delinquency rate is the share of the total number of mortgaged home loans in the U.S. where payment is overdue by 30 days or more. Many borrowers eventually manage to service their loan, though, as indicated by the markedly lower foreclosure rates. Total home mortgage debt in the U.S. stood at almost ** trillion U.S. dollars in 2024. Not all mortgage loans are made equal ‘Subprime’ loans, being targeted at high-risk borrowers and generally coupled with higher interest rates to compensate for the risk. These loans have far higher delinquency rates than conventional loans. Defaulting on such loans was one of the triggers for the 2007-2010 financial crisis, with subprime delinquency rates reaching almost ** percent around this time. These higher delinquency rates translate into higher foreclosure rates, which peaked at just under ** percent of all subprime mortgages in 2011.

Formaat: MP4Omvang: 47,2 Mb27 February 2008Online beschikbaar: [01-12-2014]Standard Youtube LicenseUploaded on Jun 11, 2008Video summary of the ALDE workshop "The International Financial Crisis: Its causes and what to do about it?"Event date: 27/02/08 14:00 to 18:00Location: Room ASP 5G2, European Parliament, BrusselsThis workshop will bring together Members of the European Parliament, economists, academics and journalists as well as representatives of the European Commission to discuss the lessons that have to be drawn from the recent financial crisis caused by the US sub-prime mortgage market.With the view of the informal ECOFIN meeting in April which will look at the financial sector supervision and crisis management mechanisms, this workshop aims at debating a wide range of topics including:- how to improve the existing supervisory framework,- how to combat the opacity of financial markets and improve transparency requirements,- how to address the rating agencies' performance and conflict of interest,- what regulatory lessons are to be learnt in order to avoid a repetition of the sub-prime and the resulting credit crunch.PROGRAMME14:00 - 14:10 Opening remarks: Graham Watson, leader of the of the ALDE Group14:10 - 14:25 Keynote speech by Charlie McCreevy, Commissioner for the Internal Market and Services, European Commission14:25 - 14:40 Presentation by Daniel Daianu, MEP (ALDE) of his background paper14:40 - 15:30 Panel I: Current features of the financial systems and the main causes of the current international crisis.-John Purvis, MEP EPP-Eric De Keuleneer, Solvay Business School, Free University of Brussels-Nigel Phipps, Head of European Regulatory Affairs Moody's-Wolfgang Munchau, journalist Financial Times-Robert Priester, European Banking Federation (EBF), Head of Department Banking Supervision and Financial Markets-Ray Kinsella, Director of the Centre for Insurance Studies University College Dublin-Servaas Deroose, Director ECFIN.C, Macroeconomy of the euro area and the EU, European Commission-Leke Van den Burg, MEP PSE-David Smith, Visiting Professor at Derby Business School

Formaat: MP4Omvang: 47,2 Mb27 February 2008Online beschikbaar: [01-12-2014]Standard Youtube LicenseUploaded on Jun 11, 2008Video summary of the ALDE workshop "The International Financial Crisis: Its causes and what to do about it?"Event date: 27/02/08 14:00 to 18:00Location: Room ASP 5G2, European Parliament, BrusselsThis workshop will bring together Members of the European Parliament, economists, academics and journalists as well as representatives of the European Commission to discuss the lessons that have to be drawn from the recent financial crisis caused by the US sub-prime mortgage market.With the view of the informal ECOFIN meeting in April which will look at the financial sector supervision and crisis management mechanisms, this workshop aims at debating a wide range of topics including:- how to improve the existing supervisory framework,- how to combat the opacity of financial markets and improve transparency requirements,- how to address the rating agencies' performance and conflict of interest,- what regulatory lessons are to be learnt in order to avoid a repetition of the sub-prime and the resulting credit crunch.PROGRAMME14:00 - 14:10 Opening remarks: Graham Watson, leader of the of the ALDE Group14:10 - 14:25 Keynote speech by Charlie McCreevy, Commissioner for the Internal Market and Services, European Commission14:25 - 14:40 Presentation by Daniel Daianu, MEP (ALDE) of his background paper14:40 - 15:30 Panel I: Current features of the financial systems and the main causes of the current international crisis.-John Purvis, MEP EPP-Eric De Keuleneer, Solvay Business School, Free University of Brussels-Nigel Phipps, Head of European Regulatory Affairs Moody's-Wolfgang Munchau, journalist Financial Times-Robert Priester, European Banking Federation (EBF), Head of Department Banking Supervision and Financial Markets-Ray Kinsella, Director of the Centre for Insurance Studies University College Dublin-Servaas Deroose, Director ECFIN.C, Macroeconomy of the euro area and the EU, European Commission-Leke Van den Burg, MEP PSE-David Smith, Visiting Professor at Derby Business School

Graph and download economic data for Delinquency Rate on Single-Family Residential Mortgages, Booked in Domestic Offices, All Commercial Banks (DRSFRMACBS) from Q1 1991 to Q1 2025 about domestic offices, delinquencies, 1-unit structures, mortgage, family, residential, commercial, domestic, banks, depository institutions, rate, and USA.